As a bill to make more aircraft eligible for a lower property tax rate makes its way through the Missouri legislature, a lesser-known provision of state tax law is helping owners of some aircraft that weigh more than 3,000 pounds lower their tax bills by classifying their aircraft as “commercial.”

House Bill 2784 would increase the number of hours an “antique aircraft” can fly a year from “less than 50 hours” to “less than 250 hours.” Aircraft classified as antiques and those considered homebuilt face a lower tax liability than other aircraft, currently at five percent of assessed value.

Yasmina Platt, AOPA’s Central Southwest regional manager, testified in favor of the measure before the House Ways and Means Committee at an April 12 hearing, as did three other pilots. The bill cleared the committee on April 19 and has since passed the House Select Committee on Financial Institutions and Taxation as well. It is now awaiting consideration and a vote by the House floor before heading to the Senate.

An existing provision offers other pilots of some aircraft a different way to cut their taxes. Rather than pay property tax based on an assessed value of 33.3 percent of the true value of an aircraft that weighs more than 3,000 pounds maximum gross takeoff weight, an owner may request that the state’s tax commission classify the aircraft as commercial (in tax terms), and set the valuation and assessment of the aircraft. The panel sets those figures by June 15 each year.

“The property tax is then based upon a percentage of the miles the aircraft is flown in or over Missouri versus the total miles the aircraft is flown,” Platt said.

A tax official explained that the percentage of an aircraft’s total yearly flight time spent flying in or over Missouri produces an “allocated market value.” The tax assessment rate of 33.3 percent is applied to the aircraft as personal property. The local tax rate is applied per $100 of the aircraft’s assessed value. The local tax rate varies by county. The determination of tax situs is based using the county of residence for individual owners, and for corporations it is the county location of the hangar where the aircraft is kept. The tax lien date is Jan. 1.

In one hypothetical example, 70 percent of the aircraft’s market value was not subject to tax liability because the commercial aircraft formula resulted in an allocated market value of 30 percent of its true market value for tax purposes.

Because such tax strategies often only become known by word of mouth, Platt said she wants pilots to understand their options for paying state taxes on their aircraft.

“While going through this process, I learned that part of the problem is that pilots and aircraft owners and their county assessors just don’t know or understand the existing ‘commercial aircraft’ deduction, and providing this information is meant to help raise their awareness,” she said. Platt will also address the issue at the Missouri Pilots Association’s sixty-third annual convention starting June 10 in Osage Beach.

The current tax rules arose from an unlikely beginning: a natural disaster in 1993. A flood in St. Louis that year forced the relocation of aircraft to other states, where owners realized that their tax bills were higher in Missouri.

To get them back, Missouri at first defined “Commercial Aircraft” for taxation purposes as weighing more than 12,500 pounds—and they would only pay the tax based on a pro rata share of time flown over Missouri.

“The plan worked and Missouri saw the return of aircraft,” Platt said. The last revision of the rules reduced the minimum eligible weight to 3,000 pounds.

Recently Platt has discussed the tax picture with the owner of a Cirrus aircraft (maximum gross takeoff weight approximately 3,400 pounds) who obtained the commercial aircraft designation recently for the first time, and has begun to employ other strategies to complement his effort to minimize his aircraft property taxes.

“He says he plans flights outside the state as much as possible. He will even refuse direct clearances from ATC sometimes, to spend as much time outside Missouri airspace as possible.”

The aircraft owner was not initially aware of the commercial aircraft tax benefit “because his county assessor did not make him aware, because he or she, in turn, did not know about it,” Platt said.

Now, however, the Cirrus owner expects to pay only “10 to 15 percent of the original tax,” he said in an email.

Aircraft owners can research the process of having an aircraft classified as commercial, and learn how to apply to have an aircraft assessed as such for tax purposes at this Missouri State Tax Commission website. Instructions and explanations are provided for forms that must be submitted to the appropriate county assessor by March 1, and to the tax commission by May 1. Providing an email address is required to facilitate the processing of some documentation.

When the tax commission receives the appropriate documentation, it will send a simultaneous email to the taxpayer and the county acknowledging receipt.

For more information, contact Rosella Schad, PE, CPA, Original Assessment Section, Missouri State Tax Commission by email or at 573/751-1729.

Dan Namowitz

Associate Editor Web

Associate Editor Web Dan Namowitz has been writing for AOPA in a variety of capacities since 1991. He has been a flight instructor since 1990 and is a 30-year AOPA member.